WIN OR LOSE ACQUISITION CORP - 10-K Annual Report

Back to GetFilings.com

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2003

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to _________________.

Co mmission file number 000-32783

WIN OR LOSE ACQUISITION CORPORATION

(Exact name of registrant as specified in its charter)

DELAWARE

59-3685745

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

1268 Bayshore Boulevard

Dunedin, Florida

34698

(Address of principal executive offices)

(zip code)

Registrant’s telephone number, including area code

(727) 734-7346

Securities Registered pursuant to Section 12(g) of the Act

Common Stock, par value $.001 per share

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed fiscal quarter. N/A

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

Title of Class

Outstanding at March 29, 2003

Common Stock, $0.001 Par Value

2,400,000 Shares

No documents are incorporated by reference in this Form 10-K.

Page 1

TABLE OF CONTENTS

PART I

ITEM 1

Business

3

ITEM 2

Properties

16

ITEM 3

Legal Proceedings

16

ITEM 4

Submission of Matters to a Vote Of Security Holders

16

PART II

ITEM 5

Market for Common Equity and Related Stockholder Matters

16

ITEM 6

Selected Financial Data

17

ITEM 7

Management’s Discussion and Analysis of Financial Condition and Plan of Operations

17

ITEM 7A

Quantitative and Qualitative Disclosures About Market Risks

18

ITEM 8

Financial Statements and Supplementary Data

18

ITEM 9

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

32

ITEM 9A

Controls And Procedures

32

PART III

ITEM 10

Directors and Executive Officers

33

ITEM 11

Executive Compensation

35

ITEM 12

Security Ownership of Certain Beneficial Owners and Management

36

ITEM 13

Certain Relationships and Related Transactions

36

ITEM 14

Principal Accounting Fees and Services

37

PART IV

ITEM 15

Exhibits, Financial Statement Schedules and Reports on Form 8-K

37

Signatures

38

Page 2

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

“Forward-looking” statements have been included throughout this report on Form 10-K. These statements arise most frequently in connection with our attempt to predict future events. The words “may,” “will,” “expect,” “believe,” “plan,” “intend,” “anticipate,” “estimate,” “continue,” and similar expressions, as well as discussions of our strategy, are intended to identify forward-looking statements. Although we believe that these forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will in fact occur and caution that actual results may differ materially from those in the forward-looking statements. The important factors listed in the section entitled “Risk Factors,” as well as any cautionary language in this report on For m 10-K, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations described in any forward-looking statements. You should be aware that the occurrence of the events described in this Report could have an adverse effect on our business or financial condition. You should also be aware that the “forward-looking” statements are subject to a number of risks, assumptions and uncertainties, such as:

Our goals, our business plan and the availability of suitable targets;

Our ability to locate a suitable target, conduct an adequate due diligence investigation and negotiate a reasonable business combination;

Our ability to execute our business plan in compliance with the requirements of Rule 419;

The potential development of a public trading market for the combined companies’ shares;

Changes in general business and market conditions and our ability to react to these changes;

Our status as a blank check company with an evolving and unpredictable business model;

Our ability to satisfy our future capital requirements and react to business opportunities;

Complex regulations that apply to us as a blank check company;

Other factors including those detailed in this report on Form 10-K under the heading “Risk Factors.”

You should not unduly rely on forward-looking statements, which speak only as of the date of this report. Except as required by law, we are not obligated to publicly release any revisions to these forward-looking statements to reflect events or circumstances occurring after the date of this report or to reflect the occurrence of unanticipated events. All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the forward-looking statements in this report .

PART I

ITEM 1 — BUSINESS

Introduction

We are a blank check company that was incorporated in Delaware on December 1, 2000, for the purpose of conducting a public distribution of securities and then effecting a merger, acquisition or other business combination transaction with an unidentified private company that wants to be publicly held. We refer to merger and acquisition transactions as “business combinations” and we refer to business combination candidates as “targets.” Our business plan may be described as a “blind pool” because we do not know what the business of our company will be.

The IPO market has been very weak since the spring of 2000 and many proposed IPO’s have been delayed or abandoned. Despite uncertain market conditions, we believe that a substantial number of adequately financed private companies want to become publicly held in order to satisfy the requirements of their early-stage investors or implement other growth strategies. We believe our blank check company structure may present a viable alternative for certain private companies that want to be publicly held, but have been unable to conduct an IPO.

Page 3

Our goal is to effect a business combination on terms that will give our stockholders a reasonable share of the increased value that ordinarily arises when a private company makes the transition to public ownership. To date, our business activities have been limited to conducting our public offering and evaluating a number of potential targets. We have not yet selected a suitable target. We have no plans to engage in any particular business in the future and we will not limit our search to a particular industry.

Overview of Rule 419

Blank check companies have been used as vehicles for fraud and manipulation in the penny stock market. In response to a Congressional mandate, the SEC adopted Rule 419, which requires blank check companies like ours to implement certain safekeeping, disclosure and reconfirmation procedures in their public offerings, including:

Depositing at least 90% of any net offering proceeds in escrow until the requirements of Rule 419 have been satisfied and an acquisition has been completed;

Depositing all stock certificates for shares distributed to the public in escrow until the requirements of Rule 419 have been satisfied and an acquisition has been completed;

Conducting a reconfirmation offering for the purpose of giving public stockholders an opportunity to review and consider detailed prospectus disclosure concerning a proposed acquisition;

Giving each public stockholder an opportunity to either approve the proposed acquisition and retain his shares, or reject the proposed acquisition and unwind his share acquisition transaction;

Unwinding transactions with individual stockholders that fail to approve the reconfirmation offering; and

Unwinding all transactions if a specified percentage of the public stockholders do not approve the reconfirmation offering in writing, or if a suitable acquisition is not closed within 18 months.

Rule 419 applies to every registration statement filed by a blank check company and regulates both issuer transactions and the resale of outstanding securities.

History of our company

On December 21, 2000, we filed a Form S-1 registration statement under the Securities Act of 1933 (the “Securities Act”) for an initial public offering of our common stock. We subsequently filed a Form 8-A registration statement to register our common stock under Section 12(g) of the Securities Exchange Act of 1934 (the “Exchange Act”). Our registration statements were ultimately declared effective on June 7, 2002. In its final form, our Form S-1 registration statement under the Securities Act included the following securities:

400,000 common shares that our officers intended to transfer as gifts to 800 donees selected by them;

1,600,000 common shares that our officers intended to offer to sell to our advisors, the owners of a target and other participants in a business combination; and

12,600,000 common shares that our company intended to offer to issue in connection with an acquisition.

Our officers completed the gift share distribution on August 2, 2002. In connection with the distribution, they gave 400,000 gift shares and 3,000 founders’ shares to 806 family members, friends and business acquaintances selected by them. We refer to the gift share recipients as “donees.” Each donee received 500 gift shares and each gift transaction was subject to Rule 419.

In August of 2002, our company and our officers entered into consulting agreements with seven advisors who provided personal services to our company. Under these contracts, we agreed to pay certain cash compensation to the advisors and our officers agreed to grant the advisors a conditional right to purchase a total of 80,000 founders’ shares at a price of $0.25 per share. Each of the transactions with advisors was also subject to Rule 419.

Page 4

Market conditions were very poor in late 2002 and early 2003. Moreover, our president became ill in early 2003 and she subsequently learned that her condition would require complex surgery and a lengthy recovery. The combination of poor market conditions and unanticipated medical problems negatively impacted our ability to implement our business plan. Since our prior distribution was subject to Rule 419 and we were unable to close an acquisition within 18 months, we unwound the gift share distribution, terminated the agreements with advisors and removed the gift shares, founders’ shares and acquisition shares from registration.

Between December 2000 and December 2003, our officers spent $218,999 to organize our company, register our securities and finance our operations. The expenses included $7,215 in organization costs, $176,479 in offering costs and $35,305 in operating costs. When we unwound our prior distribution was unsuccessful, all accumulated costs were charged to expense. We had $1.085 in cash and $2,250 in current liabilities at December 31, 2003.

At December 31, 2003, our company had 2,400,000 common shares issued and outstanding that were owned by our four officers. There were no outstanding warrants, options or other agreements that entitled any donees, advisors or other third parties to either purchase shares from our company or acquire shares from our officers.

In January 2004, after considering the available options, our officers decided to recapitalize our company and file a second registration statement under the Securities Act for a substantially identical distribution of securities. Our officers contributed $20,000 to our company on January 23, 2004 and an additional $20,000 on March 8, 2004. Our new Form S-1 registration statement was filed on February 20, 2004 and became effective on March 8, 2004. We believe market conditions and our president’s health have improved to a point where we have a reasonable probability of success. However we cannot give you any assurance that our current distribution will have a better outcome than our prior distribution.

X-Clearing Corporation of Denver, Colorado is the transfer agent and registrar for our common stock. All of our issued and outstanding shares are presently held in uncertificated form. Upon completion of the gift share distribution, our officers will instruct the transfer agent to prepare physical certificates for the gift shares that are transferred to donees. Those certificates will then be deposited in a Rule 419 escrow at Wachovia Bank. Any shares that are subsequently reserved for sale to advisors will remain on deposit with the transfer agent in uncertificated form until we conduct our Rule 419 reconfirmation offering and the advisors exercise their stock purchase rights.

Overview of shell transactions

The two most common ways for a private company to “go public” are a traditional IPO, or a business combination with a public shell. Most private companies that decide to go public do so because they need to raise capital. But financing is not the only reason that private companies decide to go public. Other reasons include:

Increasing total stockholder value by transforming a private company into a public company;

Creating an “alternative currency” (i.e. publicly traded shares) that can be used for acquisitions;

Facilitating equity-based compensation for employees and management;

Providing investment liquidity for investors and minority stockholders; and

Preparing a foundation for future financing activities.

We believe an IPO is usually preferable to a shell transaction. But in cases where an adequately financed private company wants to go public for reasons other than a current need for additional capital, we believe it is important for the management and owners to carefully consider the pros and cons of each alternative. The following table highlights some of the differences we believe the management and owners of a private company should consider before deciding between an IPO and a shell transaction.

Page 5

Characteristics of IPO market		Characteristics of business combination market

An IPO usually generates substantial cash proceeds and dilutes the ownership interest of insiders.		Business combinations do not usually generate substantial cash proceeds or dilute ownership.

The IPO market can be “trendy,” and if a company is not in a “hot” industry it can be difficult or impossible to conduct an IPO.		The business combination market is frequently less concerned with current market trends.

Secondary markets develop rapidly, the markets are generally liquid and there is usually a good balance between sellers and buyers.		Secondary markets develop slowly, liquidity is often a problem and there are frequently more sellers than buyers.

The IPO market is very sensitive to current market conditions and deals are frequently aborted or delayed at a relatively late stage in the process.		The business combination market has less sensitivity to current market conditions and deals are less likely to be aborted or delayed in their final stages.

The IPO market has a high degree of visibility and companies that complete an IPO find it relatively easy to develop “institutional” interest in their stock.		The business combination market has relatively low visibility and companies frequently find it difficult to develop “institutional” interest in their stock.

Because of the competition and due diligence associated with the IPO process, companies that complete an IPO are often perceived as more substantial and credible.		Companies that engage in shell transactions are generally viewed with skepticism for an extended period of time.

The generic term “public shell” can be used to describe any existing company that has no substantial business activities, a relatively large stockholder base and outstanding stock that may be lawfully resold by the holders. Within this broad definition, there are substantial variations in the structure, value and overall utility of public shells. The factors that are typically considered when evaluating a public shell include:

Control status

Public shells that can offer a controlling interest to the owners of a target are generally more desirable than shells that cannot implement a change in control.

Regulatory status

Public shells that are registered with the SEC are generally more desirable than shells that will be required to register with the SEC at some future date.

1933 Act registration

Public shells that can issue registered stock in connection with a business combination are generally more desirable than shells that can only issue restricted stock.

Trading status

Public shells that are listed for trading or eligible for immediate listing are generally more desirable than shells that will be required to pursue a listing at a future date.

Available resources

Public shells that have available resources, particularly cash resources, are generally more desirable than shells that have no available resources or material liabilities.

Prior operations

Public shells that have no prior operations are generally more desirable than shells that have prior operations and the potential for contingent liabilities.

Stock distribution

Public shells that have a substantial number of existing stockholders and a relatively even distribution of stock ownership are generally more desirable than shells that have a small number of stockholders, or a few stockholders who control large blocks of stock.

In developing a structure for our blank check company, we have endeavored to maximize our competitive advantages and minimize our competitive disadvantages. Therefore, we believe our company will have a strong

Page 6

competitive position when compared with other available public shells. We can provide you no assurances, however, that potential targets will find our structure more desirable than competitive shells.

Information requirements for targets

We must file a post effective amendment to our registration statement and conduct a reconfirmation offering before we close a business combination. Rule 419(e)(1) requires that the amendment contain:

The information specified by Form S-1 and the applicable Industry Guides;

Audited balance sheets as of the end of the two most recently completed fiscal years and unaudited interim balance sheets for the dates specified in Regulation S-X;

Audited statements of income and cash flow for the three most recently completed fiscal years and unaudited interim statements of income and cash flow for the periods specified in Regulation S-X; and

Unaudited pro forma financial information on the combined companies.

We cannot enter into a business combination with a target that cannot provide the foregoing information. Our future SEC filings must comply with the requirements of Regulations S-K and S-X, which can be more complex than their counterparts under Regulation S-B. Therefore, the owners of a potential target may decide that added cost of regulatory compliance will make our company less desirable than a competing public shell.

Selecting a target

We anticipate that our officers and a variety of unaffiliated sources will bring potential targets to our attention. Potential lead sources include broker-dealers, investment bankers, venture capitalists, attorneys and other members of the financial community, who may present solicited or unsolicited proposals. We will not enter into exclusive relationships with professional firms that specialize in business acquisitions. We may, however, agree to work with such firms on a non-exclusive basis.

In evaluating potential targets, our officers will ordinarily consider the following factors, among others:

The target’s liquidity, financial condition and results of operation;

The target’s growth potential and future capital requirements;

The nature, competitive position and market potential of the target’s products, processes or services;

The relative strengths and weaknesses of the target’s intellectual property protection;

The education, experience and abilities of the target’s management and key personnel;

The regulatory environment within the target’s industry; and

The market performance of the equity securities of similar public companies in the target’s industry.

The foregoing is not an exhaustive list of the factors we may consider in our evaluation of potential targets. We will also consider other factors that our officers deem relevant under the circumstances. In evaluating a potential target, we intend to conduct a due diligence review that will include, among other things, meetings with management and key staff, inspection of properties and facilities, reviews of material contracts, financial statements and projections, and any other matters that we believe are relevant under the circumstances.

Our registration statement includes 12,600,000 acquisition shares that we may issue in connection with a business combination. It also includes 1,597,000 shares that our founders may resell to our advisors, owners of a

Page 7

target and other participants in the business combination. Within these limits, our officers will have unlimited flexibility to structure a business combination and establish terms for the resale the founders’ shares.

The time, effort and expense required to evaluate a target and negotiate a business combination cannot be predicted with any degree of accuracy. We do not have any full-time employees. Our officers act as part-time employees but are not required to devote any specific amount of time to our business. If our officers do not devote adequate time to investigation, due diligence and negotiations, we may be unable to identify a suitable target, negotiate a business combination and comply with the requirements of Rule 419 in a timely manner.

Limited ability to evaluate management

We intend to evaluate the management of a potential target when considering the desirability of a business combination. We cannot assure you that our assessment will prove to be correct or that a target’s management will possess the particular skills, qualifications and abilities required to effectively manage a public company.

We may require the target to recruit additional personnel to supplement its current management team. We cannot assure you that a target will have the ability to recruit additional managers, or that any new management team members that are recruited will have the requisite skills, knowledge or experience.

While one or more of our officers may remain involved in the affairs of the combined companies, they are not likely to have executive or board level authority. While our officers have significant experience in a variety of industries, we cannot assure you that our officers will have significant experience or knowledge relating to the operations of a particular target. The prospectus for our reconfirmation offering will include summary information on the identity, education and experience of the officers, directors and key personnel of the target.

Valuation of targets

Our board of directors intends to rely on established metrics that are generally used in the financial community to determine the value of a target and negotiate the terms of a business combination. Our board of directors will ordinarily begin its evaluation of a target using the following objective factors, among others:

The target’s audited balance sheet;

The target’s historical and projected sales; and

The target’s historical and projected results of operations and cash flow.

In most cases, our board of directors will also consider a variety of subjective factors that can have a positive or negative impact on valuation decisions, including:

Overall conditions in the target’s industry and the target’s competitive position within its industry;

The relative strengths and weaknesses of the target’s business development plans;

The market capitalization of similarly situated public companies; and

The relative strengths and weaknesses of the target, compared with similarly situated public companies.

Based on their analysis, our board of directors will reach a conclusion concerning the fair market value of a target. It will then attempt to negotiate a business combination that maximizes stockholder value. The board of directors may retain independent experts to assist in the evaluation of a target but it is not required to do so.

The valuation of a potential target is an inherently subjective process that is subject to a substantial degree of risk and uncertainty. Our directors are not experts in the evaluation of businesses. We can offer no assurance that our directors will be able to accurately assess the value of a particular target. We can offer no assurance that our directors will be able to negotiate a business combination on terms that are advantageous to our stockholders. If a

Page 8

business combination is concluded, we can give you no assurance that the combined companies’ shares will ever achieve a market price that is in line with the value determined by our board of directors.

Amex listing standards The following table summarizes the quantitative listing standards for companies that want to list their securities on the American Stock Exchange

Standard 1

Standard 2

Standard 3

Standard 4

Operating history

N/A

2 years

N/A

N/A

Stockholders' equity

$4,000,000

$4,000,000

$4,000,000

N/A

Net income in last year or two of

three most recent years

$750,000

N/A

N/A

N/A

Total Market capitalization

N/A

N/A

$50,000,000

$75,000,000

or

Total Assets

$75,000,000

and

Total Revenue

$75,000,000

Minimum price

$3

$3

N/A

N/A

Market value of public float

$3,000,000

$15,000,000

$15,000,000

$20,000,000

Distribution alternatives

800 public stockholders and 500,000 shares publicly held or

400 public stockholders and 1 million shares publicly held or

400 public stockholders, 500,000 shares publicly held and

average daily trading volume of 2,000 shares for last 6 months

Nasdaq listing standards The following table summarizes the quantitative listing standards for companies that want to list their securities on the Nasdaq Stock Market:

SmallCap

National Market System

Operating history

1 year

and

N/A

2 years

and

N/A

Stockholders' equity

$5,000,000

or

$15,000,000

$30,000,000

N/A

Net income in last year or two of

three most recent years

$750,000

or

$1,000,000

N/A

N/A

Market capitalization

$50,000,000

N/A

N/A

$75,000,000

or

Total Assets

N/A

N/A

N/A

$75,000,000

and

Total Revenue

N/A

N/A

$75,000,000

Minimum price

DELAWARE		59-3685745
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

1268 Bayshore Boulevard
Dunedin, Florida		34698
(Address of principal executive offices)		(zip code)

Registrant’s telephone number, including area code		(727) 734-7346

Title of Class				Outstanding at March 29, 2003
Common Stock, $0.001 Par Value			2,400,000 Shares

ITEM 1	Business	3

ITEM 2	Properties	16

ITEM 3	Legal Proceedings	16

ITEM 4	Submission of Matters to a Vote Of Security Holders	16

ITEM 5	Market for Common Equity and Related Stockholder Matters	16

ITEM 6	Selected Financial Data	17

ITEM 7	Management’s Discussion and Analysis of Financial Condition and Plan of Operations	17

ITEM 7A	Quantitative and Qualitative Disclosures About Market Risks	18

ITEM 8	Financial Statements and Supplementary Data	18

ITEM 9	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	32

ITEM 9A	Controls And Procedures	32

ITEM 10	Directors and Executive Officers	33

ITEM 11	Executive Compensation	35

ITEM 12	Security Ownership of Certain Beneficial Owners and Management	36

ITEM 13	Certain Relationships and Related Transactions	36

ITEM 14	Principal Accounting Fees and Services	37

ITEM 15	Exhibits, Financial Statement Schedules and Reports on Form 8-K	37

	Signatures	38

Control status		Public shells that can offer a controlling interest to the owners of a target are generally more desirable than shells that cannot implement a change in control.

Regulatory status		Public shells that are registered with the SEC are generally more desirable than shells that will be required to register with the SEC at some future date.

1933 Act registration		Public shells that can issue registered stock in connection with a business combination are generally more desirable than shells that can only issue restricted stock.

Trading status		Public shells that are listed for trading or eligible for immediate listing are generally more desirable than shells that will be required to pursue a listing at a future date.

Available resources		Public shells that have available resources, particularly cash resources, are generally more desirable than shells that have no available resources or material liabilities.

Prior operations		Public shells that have no prior operations are generally more desirable than shells that have prior operations and the potential for contingent liabilities.

Stock distribution		Public shells that have a substantial number of existing stockholders and a relatively even distribution of stock ownership are generally more desirable than shells that have a small number of stockholders, or a few stockholders who control large blocks of stock.

	Standard 1	Standard 2	Standard 3	Standard 4

Operating history	N/A	2 years	N/A	N/A
Stockholders' equity	$4,000,000	$4,000,000	$4,000,000	N/A
Net income in last year or two of
three most recent years	$750,000	N/A	N/A	N/A
Total Market capitalization	N/A	N/A	$50,000,000	$75,000,000	or
Total Assets				$75,000,000	and
Total Revenue				$75,000,000

Minimum price	$3	$3	N/A	N/A
Market value of public float	$3,000,000	$15,000,000	$15,000,000	$20,000,000

Distribution alternatives	800 public stockholders and 500,000 shares publicly held or
	400 public stockholders and 1 million shares publicly held or
	400 public stockholders, 500,000 shares publicly held and
	average daily trading volume of 2,000 shares for last 6 months

	SmallCap		National Market System

Operating history	1 year	and	N/A	2 years	and	N/A
Stockholders' equity	$5,000,000	or	$15,000,000	$30,000,000		N/A

Net income in last year or two of
three most recent years	$750,000	or	$1,000,000	N/A		N/A

Market capitalization	$50,000,000		N/A	N/A		$75,000,000	or
Total Assets	N/A		N/A	N/A		$75,000,000	and
Total Revenue			N/A	N/A		$75,000,000

Minimum price